Consumer Tip: Are tax refund loans worth it?

It's tax time again. This year you are in luck because you'll be getting a refund. You sure could use the money to pay down bills and expenses you ran up over the holidays.

Your tax preparer offers you cash on the spot for your anticipated refund from the government. Should you take it?

Crunch the numbers first. The offer is actually a short-term loan known as a refund anticipation loan or RAL. Your refund is used as the collateral for the RAL. Interest charges, if the loan is not repaid for one year, can approach 600 percent. Coupled with fees such as a tax preparation fee, electronic filing fee and other add-on elective fees rolled into a RAL, your net refund could shrink substantially.

Consider other options if you are short of cash to pay for tax preparation or need your refund money now. A tax refund can be obtained within 10 to 28 days if filed electronically with the Internal Revenue Service. Low-income taxpayers and those eligible to file a 1040EZ tax form can file electronically for free.

Ask tax preparers or your financial institution about less expensive options instead of a high-interest loan such as a RAL.

More information is available through the Marin County district attorney's consumer protection unit at 473-6495 or through its website at www.co.marin.ca.us/da.